GLOBAL ECONOMIC DOWNTURN WARNING

BLOOMBERG - April 14, 2026 - The International Monetary Fund downgraded its growth projection for the year after the war in the Middle East triggered a major oil shock and included the possibility of a downturn if the conflict drags on and energy infrastructure is severely damaged.

Global gross domestic product is now expected to rise 3.1% this year, compared with 3.3% predicted in January, the Washington-based fund said Tuesday in its World Economic Outlook. That’s assuming a relatively short-lived conflict and moderate gain in energy prices this year.

Given the uncertainty around the impact from the US-Israeli attack on Iran that started Feb. 28, the IMF offered two more scenarios. In the most severe, the world would come close to experiencing a recession, which is defined by the IMF as growth below 2%.

“The global outlook has abruptly darkened following the outbreak of war in the Middle East,” the fund said in the report. “Prior to the war, we were poised to upgrade our global growth forecast, reflecting continued momentum in the global economy supported by a tech investment boom, some moderation in trade policy tensions, fiscal support in some countries, and accommodating financial conditions.”

Developing economies are expected to take the biggest hit. Growth in emerging markets was cut to 3.9% this year, from a 4.2% forecast just a few months ago. The impact will be smaller in developed countries including the US, an oil exporter.

The economic fallout of the conflict — which practically closed the Strait of Hormuz and sent oil prices surging — is expected to be a top priority for finance ministers and central bankers who are in DC this week to attend the IMF-World Bank spring meetings.

Inflation Forecasts

As the conflict enters its seventh week, the outcome remains highly uncertain, with hopes for a resolution ebbing and flowing daily. President Donald Trump began a US naval blockade of the Strait of Hormuz on Monday after talks with Iran collapsed over the weekend — while at the time the two countries were weighing another round of talks.

In the IMF’s most optimistic forecast, the rate of global inflation is expected to rise to 4.4% this year from 4.1% in 2025 — reflecting an increase in energy and food prices and halting the disinflation trend of recent years. Price growth would then decelerate to 3.7% in 2027.

A middle scenario — which the IMF calls adverse — sees growth at 2.5% this year and inflation at 5.4%.

“Every day that passes and every day that we have more disruption in energy, we are drifting closer towards the adverse scenario,” IMF Chief Economist Pierre-Olivier Gourinchas said at a press briefing.

In the most severe scenario where oil prices would average $110 during the year, global economic growth would fall under 2% — something that has happened only four times since 1980, most recently during the Covid pandemic and the global financial crisis of 2008. Inflation would reach 5.8% in 2026 and further increase to 6.1% next year.

The Washington-based lender predicted the US economy will expand 2.3% this year in its reference forecast, a slight downgrade to the 2.4% expected in January. This reflects a small negative effect from the war given the net energy-exporter status of the country.

Among major economies, the hit to Europe stands out: Germany and the UK are set to expand just 0.8% each this year — a downgrade of 0.3 percentage point for the former and 0.5 percentage point for the latter.

China is expected to grow 4.4%, a small downgrade from the 4.5% expected in January, with stimulus measures offsetting the negative impact of the shock.

Growth in the Middle East and Central Asia is expected to decelerate to 1.9% from 3.6% in 2025, with Bahrain, Iraq, Kuwait and Qatar contracting. Iran’s GDP is also expected to decline this year, by 6.1%, versus a prediction of a 1.1% in January.

“The Middle East conflict halted growth momentum,” IMF Chief Economist Pierre-Olivier Gourinchas said in a blog post. “The shock’s ultimate magnitude will depend on the conflict’s duration and scale — and how quickly energy production and shipment normalize once hostilities end.”

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